On Monday, Microsoft announced that it had improved Hotmail security, in large measure to help stop attackers from hijacking Hotmail accounts.

According to John Scarrow, Microsoft's general manager of safety services, "not too long ago, account hijacking was an issue limited mostly to financial service websites." Recently, however, such attacks have become responsible for "disrupting millions of accounts every year," he said, not to mention anyone in the hijacked account owner's address book. "This type of identity theft costs users and services billions of dollars every year."

The attacks are deceptively simple: an attacker gains access to an account -- perhaps one that hasn't been used in months or years -- then emails a request for money to everyone in the account's address book. One such message, for example, claims the sender was just mugged while on vacation in the United Kingdom, and urgently needs money to help settle bills. "I'm writing this with tears in my eyes," it says.

To help block such attacks, Microsoft said it's taken multiple steps, including actively purging attackers from compromised accounts, taking legal action against domains used by scammers, and now, improving Hotmail security. For starters, when using a public machine, a Hotmail user can have a one-time password sent to their cell phone. That way, even if a keylogger or malware is installed on the PC, once the user logs out, no one can use the password to again log in.

To guard against man-in-the-middle attacks, Microsoft said it now uses SSL to encrypt the start of every session, and later this year will offer SSL for the full Hotmail session.

Should your account become hijacked, Microsoft already offers a two-proof approach for taking it back. But Scarrow said that "only 25% of people with a secret question actually remembered their answer when needed."

Accordingly, Microsoft will now let Hotmail users tie their account to a specific PC, provided they've installed Microsoft Live Essentials. In addition, they can register a cell phone number to receive a special log-in password in the event that they report their account as having been hijacked. Either of these acts as a proof; an alternate email account or secret question can be another. One proof is required to change any of the anti-hijacking parameters, such as registering a cell phone number or adding an alternate email address.

Finally, Microsoft said it's also stepping up efforts to use heuristics to better spot when accounts get hijacked in the first place. For example, to thwart dictionary attacks aimed at guessing log-in passwords, Hotmail now will temporarily prohibit log-ins after a certain number of failed attempts. The precise number of attempts allowed "depends on the reputation of the IP address being used," said Microsoft, in large measure to help block botnets.